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The Act that could rock the Charity Sector

The Government’s recent push for more controls on the charity sector is now in full swing. The new Charities (Protection and Social Investment) Bill is now awaiting Royal Assent. Many say that the Bill has the effect of making The Charity Commission ‘judge, jury and executioner’. Charity sector bodies urged MPs to include more safeguards to accompany the Charity Commission’s new powers, but these were rejected.

The new Act says that if the Charity Commission thinks that a charity is non-compliant it can, after notice to the trustees and taking into account any representations by them, issue, in any way it thinks appropriate (which could be public) an “official warning”, requiring compliance. The question is whether voluntary trustees, who may well not be able to respond very quickly, will be allowed the necessary time to make representations.

The Commission has indicated that official warnings will be used for less serious non-compliance, but the public may not understand that. Despite being a relatively minor case, it could sound very serious and have reputational consequences for the charity. A charity’s reputation is its most valuable asset and damaging this could dramatically affect their funding. If there are a lot of warnings, the reputation of the whole sector, which some say is already tarnished, could be harmed.

The new Act also makes changes to the rules about disqualification of trustees. It extends the list of criminal offences which automatically disqualify people from serving as trustees. Charities who work for the rehabilitation of offenders will be affected. The new Act will also mean that a disqualified trustee will not be able to hold a senior management position in a charity.

Furthermore, the contentious clause 11 gives the Commission a general power to disqualify a trustee if any of their conduct is, or is likely to, damage public trust and confidence in charities. You can appeal, but this is a very broadly drafted provision which is open to argument.

A balance must be struck in the effective regulation of the charity sector. Events in recent years suggest controls need to be put in place, but not so as to deter the people it relies so heavily upon. The Commission needs some powers to close loop holes and allow it to act when necessary. However, there ought to have been appropriate and proportionate safeguards.

The new Act should have struck a balance between perceived risk and over regulation. It should have been enabling and sought to empower, rather than control, voluntary activity. Volunteers will be reluctant to be involved in a charity if their personal reputations are unfairly at risk, even if they have, in theory, some redress. The new Act risks discouraging the dedicated volunteers on whom the charity sector depends for its success.

If you would like to further dicuss any of the information above, please contact Joanne Gallagher from our Corporate & Commercial team on 01892 623708.

Senior Partner, Corporate & Commercial

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